Stichting Toezicht Effectenverkeer
14 January 2002
FINAL round of consultation by CESR ON STANDARDS
FOR Alternative Trading Systems (ATSs)
CESR published today, for a second round of consultation, revised
proposals for common European standards for Alternative Trading
Systems (Ref. CESR/02-001). These have been prepared by an expert
group chaired by Howard Davies, Chairman of the UK Financial Services
Authority. Also published today was a feedback statement summarising
the responses received in the first consultation round (Ref.
CESR/02-002).
CESR has decided to issue the proposed standards for a second round of
consultation in response to the important issues raised by respondents
to the first consultation paper (Ref. FESCO/01-035b), which was issued
in June 2001. The responses received focused specifically on a) the
interlinkages between the CESR work and the revision of the Investment
Services Directive (ISD), b) the definition of an ATS, c) the need for
more clarity on implementation of the standards, d) the potential
overlap of certain standards with existing conduct of business rules,
and e) the need for more cost benefit analysis. Respondents also
commented on specific standards. The expert group considered the
respondents' comments carefully and has revised the proposed standards
for regulation of ATSs accordingly. Given the extent of the changes
made, CESR decided to provide interested parties with another
opportunity to comment.
This paper sets out proposed standards for ATSs in the European
Economic Area (EEA) with a view to providing appropriate regulation
under the ISD of investment firms operating ATSs. It builds on FESCO's
report to the European Commission on the Regulation of Alternative
Trading Systems (ATSs) in Europe, which was published in September
2000.
The standards aim to ensure, in particular, that the integrity of the
markets is protected, and also that users of ATSs are given adequate
protection. In response to comments received in the first round of
consultation, CESR has narrowed the definition of an ATS (the
`qualifying system' to which the standards apply) to multilateral
ATSs. However, this narrowing of the definition does not mean that
CESR believes that there are no regulatory issues raised by trading
activity outside multilateral ATSs. It is likely that further work
will be conducted by CESR in this area, focusing specifically on the
issue of transparency.
The need for additional regulatory standards for ATSs arises because
existing conduct of business rules do not fully address the particular
risks posed by the nature of services provided via ATSs. CESR
considers it important to move ahead with these additional standards,
providing an appropriate interim regime, before the revised ISD comes
into force.
The standards identify particular areas in which CESR believes that
additional regulation is required to secure the two primary objectives
of market integrity and investor protection. The standards will need
to be applied in a differentiated way to ensure that the risks posed
by different trading systems are appropriately addressed.
CESR believes that its objectives can best be met by concentrating on
standards in the following areas:
* Authorisation/registration: the investment firm running an ATS
should provide to the competent authorities information about the
price formation process, rules of the system, system participants
and the types of instruments traded.
* Transparency: ATSs should comply with minimum transparency
requirements.
* Reporting Rules: additional reporting requirements should be
imposed on ATSs to the extent needed to enable competent
authorities to monitor market share of ATSs and changes to the
information provided during authorisation/registration.
* Prevention of Market Abuse: requirements placed on ATSs should
make it possible to detect, deter and punish market abuse.
In response to the comments received, Howard Davies said:
"We are grateful for the thoughtful comments we received to the first consultation paper on regulatory standards for Alternative Trading Systems. A clear majority of consultees agreed that a new regulatory approach to ATSs was required but many raised concerns about some of the detailed proposals. In particular, it was argued that he new standards were justified for multilateral ATS, but not necessarily for bilateral systems. This second consultation paper has taken these concerns into account and significant changes have been made to the definition of ATSs and to the proposed standards.
We believe that these proposals are needed to ensure a level playing
field, to maintain confidence in the integrity of European financial
markets and to further develop the European single market in
financial services. The standards will also be an important input to
the revision of the ISD."
CESR invites responses to this second round of consultation by March
15, 2002. Interested parties may review the documents on the CESR
web site (www.europefesco.org), where they may also submit comments
via e-mail (secretariat@europefesco.org), sections "consultative
papers" and "Recent publication" for the full inventory of
responses. CESR intends to finalise the standards thereafter, with
the aim of publishing final standards by June of this year.
CESR Fabrice Demarigny
Secretary General of CESR
Tel: +33.(0)1.53.45.63.61
Fax: + 33.(0)1.53.45.63.60
E-mail: secretariat@europefesco.org
Web site: www.europefesco.org
CESR_Consultation_proposed standards ATS.pdf
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